Studemeir Paint & Floors (SPF) has experienced net operating losses in its Other Flooring Products line during the last few periods. SPFs management team thinks that the store will improve its profitability if it discontinues the Other Flooring Products line. The operating results from the most recent period are: Paint and Paint Supplies Carpet Other Flooring Products Sales $ 174,100 $ 280,000 $ 216,000 Cost of goods sold 100,000 195,000 172,000 SPF estimates that store support expenses are approximately 25% of revenues. Harish Rana, SPFs controller, states that while every sale has one purchase order, not every sales dollar requires or uses the same amount of store support activities. He conducts a preliminary investigation and his results and analysis are as follows: Activity (cost driver) Paint and Paint Supplies Carpet Other Flooring Products Order processing (number of purchase orders) 250 195 113 Receiving (number of deliveries) 38 165 60 Customer support (hours required per sale) 0.30 5.0 0.75 Harish estimates activity-cost rates for each activity as follows: Order processing $

170 per purchase order Receiving 190 per delivery Customer support 20 per hour Required: 1. Prepare a product-line profitability report for SPF under the current costing system. 2. Prepare a product-line profitability report for SPF using the ABC information the controller provides.